Regulation 1896/2006 (32006R1896), creating a European order for payment procedure, came into force on December 12th, 2008. This Regulation is binding in its entirety and directly applicable in the Member States. It applies in the United Kingdom and Ireland, which opted in under Article 3 of the Protocol on the Position of the United Kingdom and Ireland. (It will not apply to Denmark in accordance with Articles 1 and 2 of the Protocol on the Position of Denmark)

In essence, this Regulation is designed to create a simplified system for collecting uncontested debts between persons in different member States. The Regulation provides for the court, having jurisdiction under Regulation 44/2001, to issue, at the request of the creditor, a standard form order.

That order is then served on the debtor in question. The debtor has the opportunity to oppose the claim. If it opposes the claim, proceedings will be conducted by the court that issued the order in the form of normal civil or commercial litigation. If the defendant does not oppose the claim, the order becomes enforceable and no further exequatur is necessary.

As well as its application to normal civil and commercial litigation, the Regulation is of specific note as regards international arbitration. Readers may recall that the Brussels I Regulation contains an Arbitration Exception. This Arbitration Exception is not specific to the Brussels I Regulation. In this context, the practical consequence of Regulation 1896/2006 is to create "an exception to the exception".
In short, Regulation 1896/2006 does not take into consideration the Arbitration Exception. Moreover, Article 2 of Regulation 1896/2006 defines the scope of the Regulation, stating that, with certain exclusions, it applies to any civil or commercial matter. These exclusions do not refer to international arbitration. They comprise: rights in property arising out of a matrimonial relationship, wills and succession; bankruptcy, proceedings relating to the winding-up of insolvent companies or other legal persons, judicial arrangements, compositions and analogous proceedings; social security; and claims arising from non-contractual obligations.

As might be expected, social security and bankruptcy are included. But the scope of the exclusion does not extend to arbitration. The same applies to the status and the legal capacity of natural persons. Therefore, it would appear that Regulation 1896/2006 does indeed apply to arbitration.

This exception to the exception raises several questions: Firstly, did Parliament seek to limit the application of the Arbitration Exception and, if so, why? Why did those who drafted the Regulation omit the Arbitration Exception? Were there any specific reasons for doing so? It may be that they merely didn’t consider it or its application to situations where the simplified European order for payment might conflict with a contractual arbitration clause or, on the other hand, that they wished to leave the matter open for further discussion. Respondents must take this into consideration in formulating their arguments. European regulators may look to clarify the position.

Secondly, what are the consequences? In most cases, if there is an arbitration agreement, courts will have little (if any) jurisdiction to intervene. And when courts are petitioned to assist in constituting an arbitration tribunal, the European Order for Payment Procedure may be ineffective. The net effect seems to have been to impose complexity where case law and international regulation had together managed, after years of practice, to construct a delicate equilibrium in the tools lawyers used to manage their cases.

Thirdly, it seems inappropriate to jeopardise what has been accomplished internationally by way of maintaining the independence of arbitration proceedings. Reducing the jurisdictional competence of arbitration, in general, may lead to complexity precisely at a time when companies require efficient proceedings to solve their international problems. Companies are looking to reduce conflicts of jurisdiction and of law, not the opposite. It could be suggested that Regulation 1896/2006 represents the first step in the construction of a comprehensive pan-European regime to be applied to international arbitration. Maybe this is the first alarm bell as regards the modernisation of our arbitration regime and the shifting boundaries and efficacy of related exceptions. This is clearly a matter for further debate.